Transfer Pricing Documentation in India: Form 3CEB for a Foreign-Owned Subsidiary

Prepared by AU Corporate's CA-led advisory team · Published 14 October 2026 · Confirm the current tax-year rules and filing requirements before relying on any deadline.

An Indian subsidiary may transact with its US parent for software development, management support, royalties, loans, cost allocations or other services. Where the transactions fall within India's transfer-pricing rules, the company needs more than an intercompany invoice: it should be able to explain the transaction, how the price was determined and how the records reconcile to its books and tax filings.

1. Build a complete transaction inventory

Start with the actual flows between the Indian company, its foreign parent and other related parties. Do not limit the review to transactions labelled “management fee.” Review the ledger, bank payments, invoices, contracts and group recharge schedules together.

• Sale or purchase of goods, components or inventory.
• Software development, engineering, research, support and other services.
• Management, regional support, shared-service and cost-recharge arrangements.
• Royalties, intellectual-property licences, guarantees, loans and interest.
• Cost allocations, employee secondments and other arrangements with related parties.

2. Describe the real functions, assets and risks

For each material transaction, document who performs the work, who makes key decisions, what assets or IP are used, which party controls and bears relevant risks, and how the Indian company benefits. The analysis should reflect actual conduct rather than simply repeating contract wording.

For service charges, retain evidence that the services were actually performed and explain why the Indian entity needed them. For development or IP arrangements, identify ownership, development responsibilities, use rights and the commercial basis for any charge. For financing, document principal, currency, term, security, repayment terms and credit considerations.

3. Select and support the pricing method

Indian transfer-pricing rules require the arm’s-length price for covered transactions to be determined under the applicable framework. The method depends on the transaction and available evidence. A group policy or a price used in another country is not, by itself, proof that the Indian position is supportable.

• Record the method selected and why it is appropriate for the transaction.
• Retain comparable data, calculations, assumptions and any adjustments used.
• Explain the allocation key for shared costs and keep the underlying working.
• Revisit the analysis when functions, contracts, markets or risk allocation change.

4. Reconcile contracts, invoices and books

Before year-end, reconcile the intercompany transaction inventory to the general ledger, audited financial statements, invoices, remittances and tax return data. Investigate differences caused by accruals, foreign exchange, credit notes, cost allocations or year-end true-ups.

Keep signed agreements and amendments, invoices, deliverables, time or activity records where relevant, calculation workbooks, payment evidence and approvals. If the commercial arrangement changes, update the contract and transfer-pricing analysis rather than leaving inconsistent records.

5. Assess Form 3CEB and other reporting separately

Form 3CEB is an accountant’s report associated with specified international and specified domestic transactions under the transfer-pricing provisions. A foreign shareholder alone does not automatically mean the form is required; identify covered transactions and apply the current statutory conditions.

Also distinguish transfer-pricing documentation from other obligations, such as the income-tax return, tax audit where applicable, GST records and RBI/FEMA reporting. One filing does not replace another. Check the current Income Tax Department forms and guidance and agree a year-specific compliance calendar with the tax adviser.

6. Practical readiness checklist

• List related parties and map all cross-border transaction categories.
• Collect signed agreements, invoices and evidence of the actual work or benefit.
• Prepare functional analysis and the rationale for the pricing method.
• Retain benchmark data and calculations, including assumptions and adjustments.
• Reconcile transaction values to accounts, payments and tax records.
• Confirm Form 3CEB applicability, due dates and responsibility for filing.
• Coordinate transfer pricing with GST, withholding tax and FEMA reviews.

Related guidance

For the broader parent-subsidiary pricing framework, read our US parent–Indian subsidiary transfer-pricing guide. For service-fee evidence and related tax questions, see management fees from a US parent.

Frequently asked questions

This article is general information, not tax or legal advice. Transfer-pricing requirements and deadlines can change; obtain advice for the actual transactions and tax year.